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T&IO Weekly Market Update

5 min read 17 May 24

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We’ve produced a version of the report you can send directly to your clients. It still covers the market review and outlook, but we’ve added a Chart of the week.

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Your update produced by our in-house experts from the M&G Treasury and Investment Office (T&IO) can be read below.

In this article

Market review

Inflation and unemployment data continue to dominate short-term market moves, as both give signals to the future path of US interest rates. This week we received the key measure of US consumer price inflation for April, which confirmed expectations for a slight decline, at 3.4% (compared to 3.5% last month). The US equity market gained 1.4% this week and the benchmark US 10-year bond yield fell from 4.5% to 4.4%. China stocks continued their recent rally and outperformed other markets. The central bank announced further measures to support the structurally impaired property market. 

US retail sales data, an indicator on the strength of US consumption, slipped as higher gas prices pulled expenditure from other goods and helped support the future case for rate cuts. What is preventing lower rates currently is services inflation, dominated by wages and housing costs, both of which remain too high. At the moment, equity markets are taking comfort from a scenario where growth isn’t damaged too much but inflation is on a path to levels where the Federal Reserve can begin to cut. This dynamic, coupled with positive profit growth and forecasts from companies recently should help support equities in the short-term.

Outlook

Central banks may be in a position to ease monetary policy in the second half of 2024 but employment, activity and inflation data over the next few months will be critical to the evolution of their thinking. The US economy continues to look strong, but other regions, including the Eurozone, face more challenging conditions. This could lead to diverging rate cutting cycles and opportunities in relative value trades. Geopolitical developments could further impact investor sentiment and central bank actions, with potential knock-on effects for oil prices and inflation.

Please note that the below is relevant for all Prudential multi-asset funds. The tactical asset allocation comments relate to the WS Prudential Risk Managed Active and Passive ranges.

We maintain our 1% overweight to Equities, diversified across the US, Europe, Asia, GEM. This is funded from a small net fixed income and cash underweight.

*Please note that the tactical asset allocation (TAA) commentary does not apply to the PruFund range of funds. The TAA mandate is run by the Macro Investment Business (MIB) within M&G.

Equities

1 Week

YTD

1 Year

S&P 500

1.48%

11.66%

29.35%

FTSE 100

-0.02%

10.76%

13.44%

Euro Stoxx 50

-0.42%

13.63%

19.80%

MSCI Asia Pacific ex Japan

2.95%

8.62%

14.57%

MSCI China

2.96%

14.18%

3.25%

Government Bonds

1 Week

YTD

1 Year

Bloomberg Global Sovereign Index

1.06%

-0.69%

3.06%

Global Corporates

0.70%

-0.14%

5.02%

Global High Yield

0.56%

3.44%

13.98%

Asia Local Ccy Bonds

0.05%

-2.03%

-0.83%

Source: Bloomberg as at 11:06am on 17.5.24

Information provided has been obtained from sources that M&G Treasury and Investment Office (T&IO) believes to be reliable and accurate at the time of issue but no representation or warranty is made as to its fairness, accuracy, or completeness. The views expressed herein are subject to change without notice. No person should rely on the content or act on the basis of any matter contained in this document without obtaining specific professional advice. Neither T&IO, nor any of its associates, nor any director, or employee accepts any liability for any loss arising directly or indirectly from any use of this video. Reference to the names of each asset class/company mentioned in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies.

The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back less than the original amount invested and past performance information is not a guide to future performance.

‘M&G Treasury & Investment Office (T&IO)’ includes the team formerly known as Prudential Portfolio Management Group (PPMG). Prudential Portfolio Management Group Limited, is registered in England and Wales, registered number 2448335.

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